FAQs

POLICY COVERAGE

What are the benefits of trade credit insurance?

The benefits of credit insurance for companies are numerous. They include:

  • Identifies & mitigates risks

Credit risks associated with buyers when selling locally and associated with buyers’ and country risks when exporting.

  • Insures biggest component in working capital

The biggest component in working capital is trade receivables. Insuring it is integral for growth.

  • Protects cash flow

When your buyers do not pay on time, credit insurance allows you to protect your cash flow.

  • Better borrowing terms from banks

With a trade credit insurance policy in hand, banks will provide better borrowing terms.

CREDIT INSURANCE - EXPORTS AND DOMESTIC

What is export credit insurance?

Export Credit Insurance covers the risks associated with a buyer, to whom a policyholder is selling to on credit. It protects against the non-payment by the respective buyers. Non-payment may be due to buyer’s insolvency, protracted default, non-acceptance of goods or economic and political conditions that are out of the control of the policyholder and buyer.

What risks are off cover by Credit Oman?

Credit Oman will not cover disputes between the buyer and the policyholder regarding the supply e.g. quantity, quality, packing, etc., unless the policyholder gets a court ruling in his favour in buyer’s country. Also, it does not cover causes inherent in the nature of goods, default of any agent of the policyholder or of the collecting bank, and fluctuation in the exchange rate.

Can you afford to grant credit to your customers?

On an average, 40% of company’s assets are tied up in the form of commercial debt. All it takes for an otherwise well-run business to become insolvent is for one major customer not to meet its payments. Even smaller debts can have a destructive effect. For example, if your profit margin is 5% and your client’s debt is just RO.10000, your company will have to achieve additional sales of RO.100000 just to make up for the loss. A credit insurance policy from Credit Oman can protect from the consequences of such an event.

Why is that policyholders sometimes do not get larger credit limits on certain buyers or Credit Oman refuses or reduces cover on a buyer?

Credit Oman may restrict or refuse cover on certain buyers for various reasons. For example, it could happen if the buyer is not sufficiently credit worthy based on their financial standing or if his total commitment with other suppliers are already too high in relation to its size and financial capability or we may have recorded or received adverse payment experience or disputes with those buyers. Thus Credit Oman is of the view that such restriction of cover on buyers will safeguard the interest of the policyholders against possible losses. However, Credit Oman always tries to decide on cover as objectively and pragmatically as we can in order to promote and enhance Omani exports while evaluating the risks on buyers.

As a policyholder, should I apply for a new credit limit for each new export order from buyer?

Not necessary as the credit limit is “revolving” provided that the maximum credit outstanding at any given time does not exceed the credit limit amount already approved.

Upon receiving Credit Oman’s credit limit approval what should I do?

The policyholder should ensure that the approved buyer whose name and address is shown on the credit limit is the same party with which he/she has entered into the contract of sales. A slight variation in the name of a company can mean another separate legal entity. Should you wish to trade with the buyer’s parent or associate or subsidiary companies, it is necessary for you to send in separate Credit Limit Application (CLA) since members of the buyer’s group of companies are different legal entities. You should also pay particular attention to the amount, the payment terms, the expiry date (if any) as well as any specific conditions shown on it, e.g. the credit limit covers specific shipment only or you must report overdues to Credit Oman immediately or any other endorsement attached to the credit limit approval.

Is it necessary to limit the value of my export contract to the value of the credit limit agreed by the Agency?

Not necessary. Shipments could be effected over a period of time so that the amount outstanding for goods exported is, at any one time, within the approved limit. In other words an policyholder can undertake contracts of a value greater than that given of your credit limit, since it is revolving.

Are cancelled or suspended credit limits applicable to existing outstanding debts?

Cancelled or suspended credit limits continue to be applicable to outstanding debt pertaining to shipments effected prior to the date of cancellation or suspension of credit limit but no future shipments will be covered.

What is the validity period of a Buyer Credit Limit?

A credit limit does not have expiry date and it remains in force during the validity of the policy as it operates on revolving basis unless any credit limit is canceled and advised by Credit Oman due to adverse information on the buyer or due to unutilization for specific period.

What are the benefits of export and domestic credit insurance to policyholders?

  • It minimizes the credit risks and maximize opportunities by exporting goods abroad
  • You can derive better credit control by keeping tabs on the buyers and credit limits as approved by Credit Oman.
  • You can assign your export Credit Policy as additional collateral to a bank in order to obtain additional financing at better terms
  • You can discount export bills as with Banks
  • It provides greater financial liquidity and flexibility administering foreign receivables portfolio.

What will be the consequences of late submission of declaration of business?

As it is a violation of a specified term of the Policy, Credit Oman, as the insurer, has the right to refuse the business declaration after the stipulated time. Thus, the sales already made will be off cover. Hence, it is highly important that all your sales, whether it is domestic or exports, are declared on time.

What should the policyholder do if the buyer requests for extension of due dates of payment?

If a buyer who is unable to make payment on of the due date and requests for more time to pay the amount, the policyholder should make a good commercial judgment on the request based on facts and circumstances of the case. If it appears that extending the due date of the bill is the proper course of action, then the policyholder should seek the approval of the insurer (Credit Oman), detailing the reasons justifying such action.

Do you provide credit insurance cover for all countries?

Yes, Credit Oman provides credit insurance cover for over 115 countries worldwide and insures domestic sales.

Why should I consider insuring my business under an Irrevocable Letter of Credit?

An Irrevocable Letter of Credit provides guarantee / security for receiving your payment of export bills provided the terms and conditions of the letter of credit are strictly complied with. However, certain events of political nature in the buyer’s country could prevent performance of sales contract or transfer of funds. In such circumstances, the Export Credit Policy of Credit Oman provides you protection against such losses.

Why does Credit Oman charge premium on total business declared, even when it exceeds the credit limit amount?

According to the policy, the premium is payable on actual export and domestic sales made to various buyers on whom credit limits have been issued and not on the credit limit amount. However, Credit Oman charges premium on sales declared by the policyholder in excess of credit limit, due to the fact that those export sales made in excess of credit limit also be automatically covered once previous shipments are paid. If no premium is charged on those sales, it is off cover in accordance with the terms of the Policy in the event of non-payment by the buyer.

How much is the insured percentage under Credit Insurance Policy?

The insured percentage is up to 80% of loss against commercial risks and 85% against non-commercial risks.

How does credit limit operate?

The credit insurer issues a credit limit for every buyer with whom the policyholder trades. The level of the limit is set at the maximum amount that can be owed by the buyer at any given time. The granted credit limit is the maximum insured credit line for a specific buyer that operates on revolving basis and the policyholder can trade within the approved credit limit throughout the policy period without further reference to the Insurer.

Can I insure against a buyer in my own country?

Yes, a Domestic Credit Insurance Policy addresses the payment risks from buyer in the same country.

Why should I avail credit insurance service as I have no bad debts?

Credit Insurance Policy is a risk management tool that helps the policyholder to stabilize his/her cash flow and protect his/her trade receivables in the ever-changing competitive and economic business climate. The policyholder can also enhance his/her borrowing power from financial institutions.

How can a policyholder assist Credit Oman in processing credit limit application more quickly?

Firstly, the amount of the credit limit application should be realistic and close to the credit insured by policyholder’s probable requirements in the foreseeable future.

Second, the policyholder should provide (Credit Oman) with full and correct details of the buyer’s trading style, address and the name and address of his banker.

Third, it is important that the policyholder gives full and actual details of previous trading experience with the buyer.

Fourth, if the policyholder has up to date credit information on the buyer he can attach such reports together with any other additional information to the application.

CLAIMS

How and when do I file a claim?

You can file your claim when you are aware of any adverse information which may affect the payment of your invoices related to credit insured sales. Our Claim and Recovery Department will provide all assistance to you to file a claim and recommend appropriate measures to minimize your losses.

What documents do I need when filing a claim?

  • Copy of the sales contract
  • Sales invoices
  • Proof of debt/non-payment of sales proceeds
  • Proof of dispatching goods
  • Proof of insolvency if applicable
  • Documentation outlining the action you have taken to collect the overdue amount

What is Date of Ascertainment of Loss (DAL)?

The Export Credit Policy specifies a minimum period of time after which loss is ascertained to indemnify a claim for loss. This particular point of time is known as the “date of ascertainment of loss” which must be reached before any claim is paid.

What action should be taken by the policyholder in case the buyer requests for extension of date of payment?

If a buyer is not in a position to make payment on the due date of the export bill and requests additional time to settle the amount, the policyholder should make good commercial judgment on the request of the buyer based on facts and circumstances of the case. If the policyholder is convinced that extending the due date of the bill is the proper course of action, then the policyholder should seek the approval from Credit Oman, giving in detail, the reasons justifying such an extension.

What if there are disputes with the buyer with regard to the quality of the shipped products?

If the buyer raises any disputes regarding quality of goods exported, the claim for the resultant loss will be considered once the disputes are settled amicably by the policyholder with the buyer or the policyholder obtains judgment in his favour from the court of law in the buyer country.

When should the claims be filed when payments are not realized due to exchange transfer delay?

Where payments are not realized due to exchange transfer delays, claims can be filed with Credit Oman after six months from the date on which the buyer has, after making the payment in local currency, completed exchange control formalities necessary for the transfer of funds to Oman. Where Credit Oman has stipulated a longer waiting period, claims can be filed only after completion of such period.

When should the policyholder submit Default Declaration Form?

Notification of all payments not received within two months of their due dates should be sent to Credit Oman on the Overdue Declaration Form. The declaration should be sent on or before the 10th of every month.

RECOVERIES

What percentage of recovery made by Credit Oman of the claims it has paid since its inception?

Credit Oman has managed to recover 16% of the total claims it has paid to its policyholders since its inception of its operations. This is in line with the average for other emerging ECAs where the recovery ranges between 10% to 20%.

In the event of non-payment of any bill, what action is the policyholder expected to take?

The policyholder is expected to take necessary actions to minimize the possible losses. Action should be prompt and effective.

What recovery costs are not admissible?

Credit Oman will not contribute any costs involved in settling disputes. Also, Credit Oman does not contribute any in-house costs and overheads such as administration and travel expenses.

Does Credit Oman take over recovery action once a claim has been paid?

After payment of a claim, Credit Oman has the right to take over the debt, but while it does exercise this right in some instances, it will normally require the policyholder to continue recovery action along the path already agreed with Credit Oman subject to any further requirements it may have.

What action should the policyholder take when recoveries are received from buyer?

All proceeds of recovery action must be remitted in full promptly to Credit Oman for allocation. Credit Oman will then allocate a proportion in which the original loss was shared.

Does Credit Oman contribute to recovery costs?

Yes, Credit Oman will reimburse the policyholder the legal fees paid to lawyers in the buyer’s country up to the proportion in which liability for the debt has been admitted by Credit Oman. Also, the policyholder should obtain concurrence form Credit Oman to initiate legal action for recovery.

What is expected from the policyholder towards maximizing the recovery?

The policyholder should keep Credit Oman informed of all steps already taken towards recovery of amounts in default. Credit Oman will also suggest certain course of action for recovery based on the development and circumstances.

Once the claim has been paid by Credit Oman, will it take over recovery action?

After payment of a claim, Credit Oman has the right to take over the debt, but normally Credit Oman requires the policyholder to proceed with the recovery action along the path already advised and agreed by Credit Oman considering the insured being the contractual party with the buyer for the export sales made.

What is expected from the policyholder with regard to the recovery?

The policyholder should keep Credit Oman informed of all actions taken to recover amounts in default. Credit Oman also will assist the policyholder towards recovery action and suggest certain course of action based on the development against the action already taken by the policyholder. The policyholder is required to act on the basis of such advice provided by Credit Oman in accordance with the terms of the Export Credit Policy.

What is the role of the policyholder in the recovery and sharing of such recovery?

The policyholder is required to vigorously pursue recovery action and to keep Credit Oman informed of such action from time to time. As and when any amount is recovered, the amount will have to be shared with Credit Oman in the ratio in which the loss was borne.

Apart from indemnifying the policyholders for losses, does Credit Oman contribute towards recovery costs? If so, what nature of costs incurred by the policyholder?

Yes. Credit Oman normally reimburses the legal fees paid to the appointed lawyer and the court, in the buyer’s country in the proportion of its liability to the total outstanding debt provided the claim for loss is admitted by Credit Oman. It does not contribute other expenses such as travel expenses, auditor’s fees, translation charges and any overhead expenses, etc. However, Credit Oman is not obliged to share recovery costs, as per the policy. Also, being an insured, you should inform Credit Oman, on the legal fees agreed upon in advance.

What is the role of policyholder and Credit Oman with regard to Recovery of claim paid?

The policyholder has a prime responsibility as per the Policy to vigorously pursue recovery action and to keep Credit Oman informed of such action from time to time. As and when any amount is recovered, the amount will have to be shared with Credit Oman in the ratio in which the loss was borne.

In case of recovery expenses, documentary evidence of recovery expenses inquired by the policyholder with the approval of Credit Oman should be furnished to Credit Oman to reimburse the recovery expenses in the same proportion in which losses were apportioned between Credit Oman and the policyholder.

POST - SHIPMENT FINANCING

What are the benefits of bills discounting to eligible credit insured policyholder under the Credit Oman’s Post-shipment Financing Scheme?

The post-shipment financing allows the policyholders to improve on their liquidity or cash flow position as they get necessary funding from commercial banks through bills discounting of their export receivables and at a concessional interest rate as agreed between Credit Oman and the commercial banks in the country.

What can Credit Oman do if the policyholder faces difficulties in discounting export bills with the commercial banks with which Credit Oman has an MOU?

Upon receipt of intimation from the policyholder to this effect, Credit Oman would contact the concerned bank to ascertain the reasons for not discounting the export bills which are credit insured under the Policy and endeavor to assist the policyholder. Sometimes, the banks may have some restriction in extending further credit facilities due to past due facilities with them, or with the other banks which are under litigation.

How can banks play a greater role in the process of enhancing the services that Credit Oman provides to policyholders?

Credit Oman has signed MOUs with most commercial banks operating in Oman under the post-shipment financing program whereby credit insured policyholders can discount their export bills with commercial banks against preferential interest rates, thus reducing their post-shipment financing cost. Credit Oman can also issue pre-shipment export credit guarantees whereby banks are able to provide financing at a pre-shipment stage for working capital needs of policyholders. In addition, Credit Oman’s “Documentary Credit Insurance Policy” allows the commercial banks in Oman to add their confirmation on irrevocable letters of credit after obtaining Credit Oman’s guarantee in order to protect them against the risk of non-payment of an irrevocable letter of credit issued by the importer’s bank. Therefore, these products offered to commercial banks in the Sultanate of Oman will play a great role in the process of encouraging and promoting export insurance.

What measures are expected of you by the bank in order to minimize losses?

(1) You must use all reasonable and usual care and skill and take all practical measures, including any measures which may be required by us, to prevent or minimize loss and we shall not be liable for loss if you fail to take all such practicable measures to prevent or minimize loss within a reasonable time after you have learned of the occurrence of a cause of loss or of any event likely to cause loss;

(2) You must promptly notify Credit Oman in writing when you become aware of the occurrence of any cause of loss, or of any event likely to cause loss, or that the Issuing Bank is unable to pay its debts as and when they fall due or that the Issuing Bank is in financial difficulties.

(3) You must provide us with all information and documents that we may require.

How does the Export Credit Policy help to raise financing?

The Export Credit Policy is normally recognized by the commercial banks as a valuable form of an additional security. If necessary, the policyholder can assign the benefits of the Policy to his financing bank which allows Credit Oman to pay claims directly to the Bank. Consequently, the credit insured policyholder can enjoy improved financial facilities through relatively lower interest rates.

APIP

What is the risk covered in APIP?

The risk covered is the failure of a Supplier to pay back the Insured Advance Payment within the Protracted Default Period in case the commercial contract is not fulfilled by the Supplier.

What is the Advance Payment?

The advance payment or series of advance payments made by the Insured to the Insured’s supplier before the fulfilment of obligation of delivery of goods or rendering of services, as per the terms referred in a legally enforceable contract between the Insured and its Supplier.

Who is a Supplier?

The supplier is the entity to which the Insured has made an Advanced Payment for goods or services to be provided as per the Contract.

Suppliers are only those companies the Insurer accepts in the Credit Limit Decision and will not include the following:-

  • Any sovereign (such as king), state, government or government department and any company who receives at least 50% of their funding from government or public funds unless otherwise agreed by the Insurer in writing.
  • Any company who the Insured or any of the Insured’s directors, members, employees or associates are financially connected with.

What is a credit limit?

The agreed credit terms and maximum monetary value that the Insured may have at risk at any one point of time with each Supplier.

What is the due date?

The end of the period or the date or dates indicated in the commercial contract within which the goods should be delivered, or services should be rendered

What is the loss date?

The Loss Date for each cause of Loss is as follows:-

  • In the event of a protracted default, the Loss Date shall be the date upon which the protracted Default period expires (normally 4 months or 120 days from the original due date) , or where a provision claim form is not submitted in accordance with terms and conditions of the cover the date upon which the protracted default period expires after commencing at the date on which the Insurer received the Insured’s advice of the default on repayment of the Advance Payment.
  • In the event of the Insolvency of the Supplier, the Loss date shall be 30 days after the submission of documents that confirm the insolvency of the Supplier.

What is an Insured Advance Payment?

The following qualify for the Insured Advance payment: –

  • Owed to the Insured by the Suppliers for goods to be delivered or services to be rendered under commercial contracts by the Insured as the Insured named in the Schedule.
  • The expenses the Insured pays with the Insurer’s agreement in trying to get the Insured’s Suppliers to repay an Advance Payment.
  • The expenses the Insured pays with the Insurer’s agreement in recovering goods after the Insured has made a claim.
  • The expenses the Insured pays to an agent with the Insurer’s agreement in trying to re-sell goods recovered from a Supplier on whom the Insured has made a claim.

What are the items not included as Insured Advance Payment?

  • Any late payment interest or extra charge.
  • Any loss caused by war, hostilities, unrest or any such similar event or events and such event or events directly results in the failure of the insured Supplier or Suppliers to repay the advance payment insured by this Policy.
  • Any accident which results in a nuclear explosion or a leak of radioactivity.
  • An advance payment which is or would be covered under any other insurance if this policy did not exist.
  • Loss due to delay in the transfer of funds to the country through the banking system or losses resulting from changes in exchange rates of foreign currencies.
  • Loss because the repayment obligation of the Advance Payment is not legal enforceable obligation under the commercial contract.
  • Any advance payment made to the Supplier after a claim has already been made in respect of that Supplier unless the Insurer agrees otherwise.
  • Penalties whether contractual or awarded by Court, the cost of collection, or the prejudice to the Insured as a result of the cancellation or the undoing whether amicably or by court order of a transaction for any reasons whatsoever.

What is the amount Insured under this Policy?

The sum of Advances Payments made or paid to the Supplier.

less :-

  • the value of delivered goods or rendered services according to the commercial contract.
  • the value of all received payments, indemnities, default interest and realized other collaterals.
  • the sum of received and sold subsidiary goods, diminished for the costs of sale.
  • value of other benefits, which the Insured received in connection of the break of the commercial contract by the Supplier.

When should the Insured notify the non-repayment of the advance payment?

  • For a protracted default case, within 60 days of Advance payment refund date mentioned in the commercial contract in case the commercial contract is breached by the Supplier.
  • For an insolvency case, within 10 days of you becoming aware that the covered Supplier becomes Insolvent
  • For a bounced cheque, within 15 days of the bounced cheque date if it has not been cleared
  • When the Insurer has cancelled or suspended a Credit Limit and the Insured cannot collet an overdue refund of an advance payment within 20 days of the Date mentioned in the commercial contract.

When the Insured stop settling advance payments to his Supplier?

  • For a Protracted Default case, within 60 days of Advance Payment Refund date mentioned in the commercial contract is breached by the Supplier.
  • For an insolvency case, immediately when the Insured becomes aware that the Supplier owing a debt becomes insolvent.
  • For a bounced cheque, immediately after 10 days of the bounced cheque date if it has not been cleared.
  • When the Insurer has cancelled or suspended a Credit Limit.

What is the timeline for filing the claim?

The Insured must send the Claim form:

  • For a protracted Default case, within 90 days of Advance Payment Refund date mentioned in the commercial contract in case the commercial contract is breached by the Supplier.
  • For a insolvency case, within 20 days of the Insured becoming aware that the Supplier becomes insolvent.
  • When the Insurer has cancelled or suspended a Credit Limit and the Insured cannot collect an overdue refund of an advance payment within 30 days of the Date mentioned in the commercial contract.

What is the timeline for settlement of the claim by Credit Oman to the Insured?

Credit Oman will pay a claim for an Insured Advance Payment not later than 30 days after the earliest of the following:

  • For a protracted default claim, when the Insurer receives the Insured’s claim form including all the information and documents the Insurer needs to assess the extent of the claim. However, no payment would be made before the Loss Date.
  • For an insolvency claim, when the Insurer receives the Insured’s final claim form, including all the information and documents the Insurer needs, confirmation of the Advance payment from the Insolvency Practioner or other authorized agent. However, no payment would be made before the Loss Date.
  • The end of six months from the date when a court judgement against a Supplier in the Insured’s or the Insurer’s favour cannot be enforced.